Narendra Modi government is already reducing various layers of bureaucracy to improve efficiency, says Barclays

SummaryWith 50 days complete for Narendra Modi govt, Barclays does an early assessment of its tenure.

The market’s reaction to NDA’s election victory was very positive, and the continuous stream of reformist noise from the government has kept the market momentum strong. With 50 days complete for the Modi government, we do an early assessment of its tenure. Looking at early steps, we believe the government is on the right path to improving administrative efficiency, increasing infrastructure spend, resolving various policy and planning bottlenecks and controlling inflation. With this backdrop, we continue to believe that we could witness acceleration in GDP growth and correspondingly an improvement in India Inc's ROE (return on equity) going forward.

Towards a more efficient bureaucracy: As soon as it was sworn in, the new government focused on getting the administrative machinery functioning again—the government has reduced multiple levels of approvals, downsized the Cabinet, emphasised time-bound and transparent decision-making and sharply increased the accountability of bureaucrats and ministers alike. While the government could be taking time to think through a few critical decisions—the gas price hike, for instance—it has not shied away from taking politically difficult but fiscally prudent steps like the railway fare hike.

‘Minimum government, maximum governance’ on its way: Fulfilling its poll promise, the Modi government is already reducing various layers of bureaucracy to improve efficiency.

* It has abolished several group of ministers (GoMs) and empowered GoM (EGoM) committees, and reduced the decision-making process by cutting out layers of consultations. It has also appointed one of the smallest Cabinets in past 16 years with several ministers holding related portfolios.

* Further, in a note through the Cabinet Secretary to various ministries, the Prime Minister has asked all ministries to identify at least 10 rules that can be scrapped to simplify the system.

* Significantly, the focus of the new government is on accountability. During his first meeting of cabinet, the PM instructed all his ministers to spell out an agenda for the first 100 days in office and subsequently ensure their time-bound delivery.

* The Project Management Group (PMG), constituted under the previous government, focused on approving clearances for stuck projects; the new government has asked the various departments to closely monitor the status of cleared projects. The onus of monitoring projects (155 projects worth R5.5 tn have been cleared so far) has shifted from the department of financial services to the PMG, headed by the Prime Minister.